Cost Segregation is a commonly used strategic tax planning tool that allows companies and individuals, who have constructed, purchased, expanded, or remodeled any kind of real estate to increase cash flow by accelerating depreciation deductions and deferring federal and state income taxes. When a property is purchased, not only does it include a building structure, but it also includes all of its interior and exterior components. On average, 20% to 40% of those components fall into tax categories that can be written off much quicker than the building structure.
A Cost Segregation Study dissects the construction cost or purchase price of the property that would otherwise be depreciated over 27 1⁄2 or 39 years. The primary goal of a cost segregation study is to identify all property-related costs that can be depreciated over 5, 7 and 15 years. For example, certain electrical outlets that are dedicated to equipment such as appliances or computers should be depreciated over 5 years.
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Generates immediate increase in cash flow through accelerated depreciation tax deductions.
Quantifies property’s major components and leasehold improvements so they can be written off when replaced or renovated.
Provides an independent third-party analysis that will withstand IRS review.
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Fletcher Insurance Services, Inc.